Winners and losers in Lehigh County reassessment

Reassessments, for as much as they're about fairness, are also about winners and losers.

Some property owners will pay less. Some will pay more. Some will pay a lot more.

Lehigh County's first reassessment in more than 20 years is meant to right out-of-date and out-of-whack property assessments. The results redistribute taxes and create distinct winners and losers.

Commercial properties on the losing end read like a who's who of Lehigh County, with well-known businesses and Fortune 500 companies that chart among the Lehigh Valley's biggest employers. The leaderboard of 50 properties with the biggest tax hikes is populated by distribution warehouses, apartment complexes, strip malls and office parks, along with such Lehigh Valley icons as Mack Trucks and Dorney Park.

The Lehigh Valley Mall in Whitehall Township and The Promenade Shops at Saucon Valley in Upper Saucon Township racked up a combined $1.2 million increase in their property taxes. At $751,700 and $470,400, respectively, theirs are by far the county's biggest tax increases.

Nearly 70 percent of commercial properties will see tax increases when the reassessed values take effect next year, compared with 45 percent of residential properties. Taxes for nearly two dozen businesses will jump more than $100,000. More than 2,000 commercial properties have requested informal reviews of their reassessments. Of the 50 commercial and industrial properties facing the biggest tax hikes, 27 had filed appeals as of last week.

"Based on our experience, we believe the proposed assessed value is in excess of the fair market value of the property," spokeswoman Kimberly Pupillo said. "As a result, and because it's a standard and prudent business practice, we filed for an informal review."

Air Products, which will see a $320,756 tax increase, hasn't decided whether it will appeal.

PPL, which owns more than 130 tracts in Lehigh County, filed an appeal last week to one property's $132,000 tax increase. That property and another owned by PPL are among the county's biggest losers, making the list of top 50 tax increases by dollar amount. The utility is reviewing market data for similar properties and will meet with the assessors office to understand the county's methodology, spokesman Kurt Blumenau said.

Commercial developer Liberty Property Limited Partnership has some properties that will rack up hundreds of thousands of dollars in additional taxes and others that will be saving.

Taxes for the Dorneyville Shopping Center in South Whitehall Township will go up $114,700; for the Whitehall Mall, $139,500; and for Tilghman Square in South Whitehall, $58,900.

But the increases in store for the Lehigh Valley Mall and Promenade dwarf all others. The mall, excluding anchor properties owned by retailers, increased in value from $38.4 million to $88.9 million, a 132 percent change.

Assessed separately, its open-air lifestyle center, which leases space to Pottery Barn, J.Crew,Williams-Sonoma and other retailers, spiked in value 111 percent from $14.8 million to $31.1 million.

"They are extremely valuable malls," said Tom Muller, Lehigh County director of administration. The county worked with a mall consultant to set accurate values for the those properties, he said.

Both the Promenade and Lehigh Valley Mall command high rent for their retail spaces, which factors heavily into their valuations. The Lehigh Valley Mall is one of Simon Malls' most profitable properties, Muller said. Simon has filed an informal review for one of the mall's three parcels, housing hhgregg and Babies "R" Us.

Calls to owners of the mall and The Promenade Shops were not returned.

The Promenade Shops will appeal its assessment, which increased from $26.9 million to $106.5 million, bringing its taxes to $2.14 million. In 2011, its owner, Poag & McEwen Lifestyle Centers, sought to reduce the assessment by $10 million and lost.

"Our expert thought they were $15 million too low. They said thank you very much and left," Muller said.

While big retailers and Fortune 500 companies may be able to absorb tax hikes, it's harder for Ajay Sharma, who owns and manages Allentown's Brandywine Village and Wynnewood Greens apartment complexes. The more than $200,000 in potential new taxes shocked Sharma, whose tax hike puts him on the top 50 list.

"A few years back they (Allentown) increased the rental licensing fee per unit from $11 to $75. Now they're (Lehigh County) taking the next step," said Sharma, who is appealing the reassessments.

"It creates an enormous amount of burden on our ability to generate a quality complex, as well as make any type of income," he said. "When stuff like this happens, it increases the rent on the residents who live there. There's also a big impact on the value of the property. People don't want to buy properties when they have to pay an enormous amount of taxes."

Lehigh County reassessed more than 125,000 parcels, including 6,885 that are commercial or industrial. In addition to reflecting more accurate housing values and market conditions, the new reassessments represent 100 percent of a property's value as opposed to 50 percent, which the old assessed values reflected. That change alone does not affect the taxes owed on a property, because the tax rate will be cut in half to compensate.

None of the three local taxing bodies — the county, municipalities and school districts — will reap added income from reassessment, which redistributes existing taxes to correct the tax base. Under the new assessments, commercial and industrial taxpayers will eat up a greater portion of the tax pie as the residential slice narrows. Generally, residential taxes went down. Tax increases are more likely for homeowners in communities that rely heavily on residential property taxes than in business-rich communities such as Allentown, Whitehall and Upper Macungie Township.

Any property owner can request an informal review to sit down with an assessor and challenge the record. Property owners also may seek a formal appeal before the Board of Assessment Appeals. As of last week-week, more than 10,000 properties had generated informal reviews, with about 20 percent coming from commercial property owners. The deadline to request a review is Friday.

To be sure, not signing up for a review doesn't mean a property owner gives up the right to challenge. Larger corporations know the drill and often won't bother with an informal review.

"They've been down this path before. They know the process. They're going to skip ahead to the formal appeals," Muller said. "They'll hire their team, put together their book that'll probably be about 3 inches thick and they'll make their case."

Large and sudden tax increases can have a damaging effect on businesses that are already struggling, said Michelle Young, the Greater Lehigh Valley Chamber of Commerce's executive vice president for public policy.

"We want business people hiring," she said. "Our job as a chamber is to make sure that we are working for our businesses to grow and thrive. Any cost that's being imposed on a business is not doing that ... Obviously the commissioners had a job to do. They felt like they had to do it at this time. But this is absolutely going to affect employment and layoffs."

Thousands of businesses, though, will pay less in property taxes. The highest reduction belongs to Chicago-based industrial park owner Walsh, Higgins & Co., with property in Upper Macungie. Its $96,700 savings is nearly double that of runner-up Allentown Power Center in Whitehall.

But if the businesses facing five- and six-figure increases are the losers, then surely the winners are the residential property owners who will pay less as a result. And the municipalities, which will have accurate assessment data to fend off the appeals that chip away at revenue.

"I've never looked at it as an us-versus-them thing," Upper Macungie Board of Commissioners Chairman Ed Earley said.

"Upper Macungie came out well, certainly compared to some of the other communities in Lehigh County," Earley said. "But there can be a lot of appeals. I don't know how it's all going to shake out."

Whitehall for years has been losing assessment battles waged by commercial property owners using the state's common level ratio for Lehigh County, a measurement of how closely assessed value accurately reflects fair market value.

"As the commercial properties are appealed, more of the burden has been placed on the residential properties. And now with the reassessment, more of the burden will be placed back on commercial properties," Whitehall Mayor Ed Hozza said.

Hozza and Muller are confident the new values will stand up to appeals.